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F&C Global Smaller Companies NAV total return at 18.9 per cent


F&C Global Smaller Companies’ net asset value per share total return was 18.9 per cent for the six months ended 31 October 2009, while the share price rose 20.7 per cent as the discount narrowed.

The company’s benchmark, which is a blended index of the returns from the Hoare Govett UK Smaller Companies Index (40 per cent) and the MSCI World ex UK Small Cap Index (60 per cent), produced a total return of 18.8 per cent, so the NAV per share return was marginally better.

Given the challenging environment for stock selection at a time of rapid and sometimes indiscriminate share price movements, the company considers this to be a satisfactory performance. The board intends to review the composition of the benchmark before the end of the financial year, in the light of the evolution of the portfolio and the changing structure of global small cap indices.

The board has decided to declare an interim dividend in line with last year’s payment of 1.60p per share payable on 29 January 2010 to shareholders on the register on 29 December 2009. It will take a view on the final dividend in June next year when the full year income out-turn is known.

During the six months, returns from all parts of the world were positive. It outperformed the local small cap indices in the UK and US, the two areas where it is most exposed, but underperformed elsewhere.

Over the six months it remained underweight in the UK, but to a lesser extent than before. It funded net investment in the UK mainly by reducing the US weighting. These changes were partly due to the view that sterling could rally from the low level it had reached against the dollar, but it also felt that the US market might do less well in relative terms after its stellar performance during the company’s last financial year.

Elsewhere the company remained overweight in Asia. It says the macro-economic outlook continues to look rosy for the near and medium-term, though it is a little wary of share valuations at this point.

It stayed underweight in Europe and Japan over the period. In the former it did not expect the overall economies to perform as well as they did and therefore was too cautious, while it was right to be underweight in Japan.
The company was modestly geared throughout the period, but reduced the extent of its borrowings as share prices rose, and ended the half-year with gearing of 1.8 per cent.
Chairman Anthony Townsend (pictured) says: “The global economic outlook has improved to some extent and corporate earnings are tending to beat expectations. After this year’s focus on recovery and cyclical shares, the manager believes that quality and steady growth companies could be better relative performers in the period ahead.”

F&C Global Smaller Companies is an investment trust with net assets of GBP176.9m at the half-year end. Managed by Peter Ewins at F&C Investments in London, it aims to secure a high total return by investing in smaller companies worldwide, but retains a UK bias and is benchmarked 40 per cent to the Hoare Govett UK Smaller Companies Index and 60 per cent to the MSCI World (ex UK) Small Cap Index.

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